FINAL NOTICE

Address:

HMP The Mount, Bovingdon, Hemel Hempstead, Herts HP3 0NZ.

ACTION

1.
For the reasons set out below and pursuant to section 56 of the Act, the Authority hereby
makes an order prohibiting Mr David from performing any function in relation to any
regulated activity carried on by an authorised person, exempt person or exempt
professional firm. This order takes effect from 15 May 2019.

REASONS FOR THE ACTION

2.
As set out in more detail in the facts and matters described below, on 30 July 2018 Mr
David was:

(a)
convicted of one count of obtaining a money transfer by deception and one count
of fraud by abuse of position, each count encompassing a course of conduct
running from January 2005 to November 2017; and


(b)
sentenced to four years’ imprisonment and six years’ imprisonment respectively
in relation to the above counts, the sentences to be served concurrently.

3.
On the basis of the conduct resulting in these convictions and as set out in the facts and
matters below, Mr David is not a fit and proper person to perform any function in relation
to any regulated activity carried on by an authorised person, exempt person or exempt
professional firm. The Authority considers that his convictions demonstrate a clear and
serious lack of honesty and integrity such that he is not fit and proper to perform
regulated activities. In reaching this conclusion, the Authority has had regard to all
relevant circumstances, including the relevance and materiality of the offences and the

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severity of the risk posed by Mr David to consumers and financial institutions and to
confidence in the market generally. The Authority considers that the prohibition order set
out in paragraph 1 advances its consumer protection and integrity operational objectives
(sections 1C and 1D of the Act, respectively).

DEFINITIONS

4.
The definitions below are used in this Notice (and in the Annex):

“the Act” means the Financial Services and Markets Act 2000;

“the Authority” means the body corporate previously known as the Financial Services
Authority and renamed on 1 April 2013 as the Financial Conduct Authority;

“the Decision Notice” means the decision notice given to Mr David on 10 April 2019;

“DEPP” means the Authority’s Decision Procedure and Penalties manual;

“EG” means the Enforcement Guide;

“FIT” means the ‘Fit and Proper Test for Employees and Senior Personnel’, part of the
Handbook;

“the Handbook” means the Authority’s Handbook of rules and guidance;

“HBFS” means HBFS Financial Services Limited (now in liquidation);

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber); and

“the Warning Notice” means the warning notice given to Mr David dated 13 March 2019.

RELEVANT STATUTORY PROVISIONS

5.
The statutory and regulatory provisions relevant to this Notice are set out in the Annex.

FACTS AND MATTERS

6.
HBFS was incorporated on 29 October 2004 and was a firm of seven independent financial
advisers operating in Hertfordshire. Mr David held 75% of the shares in HBFS and his
wife held the remaining 25% of the shares. From 27 January 2005 to 30 April 2007, HBFS
was an appointed representative of another firm and from 2 April 2007 to 15 December
2017 HBFS was directly authorised by the Authority to, inter alia, provide investment
advice to clients. Notably, HBFS was never permitted by the terms of its permission to
hold client money.

7.
Mr David was approved by the Authority throughout the period of conduct that resulted
in his conviction. From 2002, Mr David was approved as a CF21 (investment advisor)
and, from 7 February 2005, as a CF1 (AR) (director of appointed representative). From
2 April 2007 to 16 August 2018, Mr David was approved by the Authority to perform the
controlled functions of CF1 (Director), CF10 (Compliance Oversight) and CF11 (Money
Laundering Reporting) at HBFS. From 1 November 2007 to 18 August 2018 he was
approved to perform the CF30 (Customer) controlled function in relation to HBFS.

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8.
Between 1 January 2005 and 10 November 2017 Mr David presented an investment
opportunity, purportedly in high interest financial products at Bank of Scotland Plc and
Barclays Bank Plc, to some of HBFS’s clients. In total 55 clients transferred approximately
£14.545 million directly to HBFS for investment in those products. The financial products
did not, however, exist. Many of the clients to whom Mr David offered this investment
opportunity were elderly, vulnerable or suffering from illness and they were relying on
the investment for care or security in their old age.

9.
Mr David used the majority of the money of the 55 HBFS clients to fund his gambling
habit, with a lesser amount used to pay school fees, mortgage payments, personal
investments and spending abroad. In the 12 years from January 2005 to October 2017,
Mr David spent approximately £15 million on gambling websites which provided returns
of approximately £1.5 million.

10.
Although Mr David did not make the investments that he had represented to the clients,
he did make periodic payments to some of them to lull them into believing there was an
investment and that it was performing well. Mr David funded those payments with money
fraudulently obtained from later investors or by withholding interest on the legitimate
investments of other clients. By making those payments, Mr David was able to maintain
the fraudulent scheme for over 12 years and ensure that clients did not become aware
of his deception.

11.
On 14 June 2018 Mr David was charged with the two offences summarised below:

a) Obtaining a money transfer by deception contrary to section 15A of the Theft Act

1968 in that between 1 July 2003 and 14 January 2007 he dishonestly obtained for
himself money transfers in the sum of £1,493,477 by deception; and

b) Fraud contrary to section 1 of the Fraud Act 2006 in that between 15 January 2007

and 10 November 2017 he committed fraud in that he dishonestly abused his position
as Managing Director of HBFS by falsely representing that clients’ money totalling
£13,052,117.48 was to be invested in specific financial products which did not exist.

12.
Mr David pleaded guilty to both charges (with a start date of 1 January 2005 for the
charge under the Theft Act) and on 30 July 2018 he was sentenced at Southwark Crown
Court to four years’ and six years’ imprisonment respectively (to be served concurrently)
for each of the above offences summarised. The sentences would have been six and nine
years respectively, had Mr David not pleaded guilty, as he received the full discount for
a guilty plea.

13.
In sentencing Mr David, the judge stated that Mr David was guilty of “very serious
offences”, that he “targeted a group with savings who were, for the most part, elderly
and vulnerable” and that Mr David’s “criminality [had] caused not only loss financially but
despair and misery to many. Lives have been ruined irreparably.... [he] exploited those
who trusted [him] with their savings …[and] took their money and gambled it away at
casinos and in paying for [his] own lifestyle... [in] a fraud of the utmost gravity with
devastating effects on others.”

14.
On 30 July 2018 Mr David was also disqualified for ten years from acting as a director
under section 2 of the Company Directors Disqualification Act 1986.

15.
Through the Warning Notice, the Authority gave notice that it proposed to take the action
described above and Mr David was given the opportunity to make representations to the
Authority about that proposed action.

16.
No representations having been received by the Authority from Mr David within the time
allowed by the Warning Notice, the default procedures in DEPP 2.3.2G permit the
allegations/matters described in the Warning Notice to be regarded as undisputed.

17.
Through the Decision Notice, the Authority gave notice of its decision to take the action
described above. Mr David did not refer the matter to the Tribunal within 28 days of the
date on which the Decision Notice was issued to him.

18.
The Authority therefore makes an order prohibiting Mr David from performing any
function in relation to any regulated activity carried on by an authorised person, exempt
person or exempt professional firm.

PROCEDURAL MATTERS

19.
This Notice is given to Mr David under and in accordance with section 390 of the Act.

Decision maker

20.
The decision which gave rise to the obligation to give this Notice was made by the Chair
of the Regulatory Decisions Committee.

21.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information
about the matter to which this Notice relates. Under those provisions, the Authority must
publish such information about the matter to which this Notice relates as the Authority
considers appropriate. However, the Authority may not publish information if such
publication would in the opinion of the Authority, be unfair to Mr David, or prejudicial to
the interests of consumers or detrimental to the stability of the UK financial system.

Authority Contacts

22.
For more information concerning this matter generally, contact Andrew Baum (direct line
0207 066 8898/ andrew.baum@fca.org.uk) or Nicole Birch (direct line 0207 066 2592/
nicole.birch@fca.org.uk) of the Enforcement and Market Oversight Division of the
Authority.

Bill Sillett
Head of Department, Enforcement and Market Oversight


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ANNEX

RELEVANT STATUTORY PROVISIONS

1.
The Authority’s operational objectives include securing an appropriate degree of
protection for consumers (section 1C of the Act) and protecting and enhancing the
integrity of the UK financial system (section 1D of the Act).

2.
Section 56(1) of the Act provides:

“The [Authority] may make a prohibition order if it appears to it that an individual is not
a fit and proper person to perform functions in relation to a regulated activity carried on
by:

(a)
an authorised person,

(b)
a person who is an exempt person in relation to that activity, or

(c)
a person to whom, as a result of Part 20, the general prohibition does not

apply in relation to that activity.”

RELEVANT REGULATORY PROVISIONS

3.
In exercising its power to make a prohibition order, the Authority must have regard to
guidance published in the Handbook and in regulatory guides, such as EG. The relevant
main considerations in relation to the action specified above are set out below.

The Enforcement Guide

4.
The Authority’s policy in relation to exercising its power to issue a prohibition order is set
out in chapter 9 of EG.

5.
EG 9.1 explains the purpose of prohibition orders in relation to the Authority’s regulatory
objectives.

6.
EG 9.2 sets out the Authority’s general policy on making prohibition orders. In particular—

(a)
EG 9.2.1 states that the Authority will consider all relevant circumstances,
including whether enforcement action has been taken against the individual by
other enforcement agencies, in deciding whether to make a prohibition order;

(b)
EG 9.2.2 states that the Authority has the power to make a range of prohibition
orders depending on the circumstances of each case; and

(c)
EG 9.2.3 states that the scope of a prohibition order will depend on, among other
things, the reasons why the individual is not fit and proper and the severity of risk
he poses to consumers or the market generally.

7.
EG 9.5.1 states that where the Authority is considering whether to make a prohibition
order against someone who is not an approved person, the Authority will consider the
severity of the risk posed by the individual and may prohibit him where it considers that
it is appropriate to achieve one or more of the Authority’s statutory objectives.

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8.
EG 9.5.2 provides that, when considering whether to exercise its power to make a
prohibition order against someone who is not an approved person, the Authority will
consider all the relevant circumstances of the case. These may include, but are not limited
to, the factors set out in EG 9.3.2. Those factors include: whether the individual is fit and
proper to perform functions in relation to regulated activities (noting the criteria set out
in FIT 2.1, 2.2, and 2.3); the relevance and materiality of any matters indicating
unfitness; the length of time since the occurrence of any matters indicating unfitness;
and the severity of the risk which the individual poses to consumers and to confidence in
the financial system.

Fit and Proper Test for Employees and Senior Personnel

9.
The Authority has issued guidance on the assessment of fitness and propriety of
individuals in FIT.

10.
FIT 1.3.1BG(1) states that the most important considerations when assessing the fitness
and propriety of a person to perform a controlled function include that person’s honesty,
integrity and reputation.

11.
FIT 2.1.1G states that in determining a person’s honesty, integrity and reputation, the
Authority will have regard to all relevant matters including, but not limited to, those set
out in FIT 2.1.3G. It notes, amongst other things and by way of example, that:

“… conviction for a criminal offence will not automatically mean an application will be
rejected. The [Authority] treats each candidate’s application on a case-by-case basis,
taking into account the seriousness of, and circumstances surrounding, the offence, the
explanation offered by the convicted person, the relevance of the offence to the proposed
role, the passage of time since the offence was committed and evidence of the individual’s
rehabilitation.”

12.
FIT 2.1.3G(1) states that the matters referred to in FIT 2.1.1G include, but are not limited
to, whether a person has been convicted of any criminal offence, noting that particular
consideration will be given to offences including dishonesty, fraud and financial crime
(amongst other things).